Financial implications of divorce

Divorce can be a challenging time both emotionally and financially. Read our guide for tips on sound financial planning throughout your divorce proceedings.

Legal fees alone for a divorce cost, on average, £1,500 and if the couple have to go to court to resolve financial matters, these can rise to between £9,000 and £12,000. If there are complex issues to resolve and assets to divide, costs can soar(1).

Paying for a divorce

Divorce can be expensive and the process can take a lot of time and energy. But there are different routes you can take depending on your financial status, the reasons for your divorce and the assets you have.

The internet is a mine of information and can offer quick and cheap solutions. offers a quick and easy service for £69 with a DIY option and a free will written for both parties.

However, a DIY divorce only covers the most basic of circumstances and does not take into account children, disputes or assets. In these cases it is always advisable to seek legal help.

"You can speak to my lawyer" is possibly one of the most expensive statements you can make. Out-of-court settlements tend to be cheaper and quicker than court proceedings, which can often take a year or longer.

It may be possible to apply for legal aid or maintenance if you are struggling to cover the costs of your divorce, but cost should not deter you from seeking legal advice – it could be beneficial in the long run.

Need help finding a solicitor? The Law Society has a searchable database.

Malcolm Stevens

The expert's view

Malcolm Stevens, family law consultant at Hugh James Solicitors, talks about the factors that influence the financial outcome of divorce.

Splitting assets

Often the marital home is the main shared asset to consider in divorce proceedings.

There are various legal routes to go down, such as one partner selling their share of the house to the other. If an amicable agreement cannot be reached, a fair division of all assets may mean that the house can be transferred to one partner to offset other assets, for example pension values.

Another option could be to sell the house, but the current state of the economy and house-prices means that many couples may want to wait until they can get a better price for their house.

If you have children, it is not unusual for the wife to be awarded use of the family home until the children have finished their education. Then the house can be sold and split between the partners. (This could also have implications for Capital Gains Tax - see below.)

You should also contact a solicitor to get advice on splitting joint bank accounts and credit cards.

Divorce and pensions

A pension is often the next largest asset after the matrimonial house, and particular attention should be paid to how they are divided.

  • Pensions offsetting this is where a couple balance how much the pension is worth against another asset, such as the matrimonial home. For example, if one partner has a large pension and the couple jointly own a home worth the same amount, they may agree that one partner can keep the property and the other the pension.
  • Pension earmarking here a couple can arrange that when one party's pension eventually comes into payment, a portion of it will be paid to the other party (bear in mind that divorce usually indicates the desire for a clean and complete break, but earmarking means you have to keep an eye on your ex's pension).
  • Pension sharing this involves splitting a pension into two new funds, giving each partner a pension pot for the future. This is declared as a percentage of the value of the pension's ‘cash equivalent transfer value’, in other words, the sum that would be transferred if the fund were moved to an alternative pension provider.

You should seriously consider taking financial advice when splitting your pension to make sure you are getting the best outcome.


When you get a divorce your will becomes invalid - former spouses are treated as if they were omitted from the will. Therefore no gift will pass to them and they cannot act as executors of the will. DIY wills are available online, but it is worth bearing in mind that unless a will is watertight legally, it is invalid. It is also important to discuss issues such as appointing a legal guardian for any children that may have resulted from the marriage.

Hidden costs

Under current tax rules gifts between husband and wife don't attract capital gains tax (CGT), however, once divorce proceedings are underway the transfer of assets and belongings may attract CGT(2).

Things to take into account include:

  • If the transfer takes place in the tax year of separation you don't pay CGT if you've lived together for at least part of that tax year or if the gift isn't ‘trading stock’ (goods that your business makes or sells).
  • If the transfer takes place in the tax year after you separated or if you transfer any assets other than your main residence CGT will apply.
  • If the transfer takes place after you've divorced the rules regarding CGT become more complex once the divorce is final. It is worth seeking legal advice or contacting the tax office when transferring assets after this point.

Pre-nuptial agreements

In October 2010, the Supreme Court ruled that pre-nuptial agreements should have compelling and decisive weight. The benefits of a ‘pre-nup’ include minimising dispute at the time of the divorce, you don't have to argue over who owns what, and what assets belong to whom and protecting your personal assets. Remember that although this judgment does strengthen the position of those choosing to enter into them, pre-nups are still not legally binding.


  1. Heaney Watson solicitors, Liverpool

Join us on Facebook

News, hints, tips and more. Take control of your financial future.